Most short sales arise when a seller owes more on their house than they can sell it for . The owner of the home then attempts to make an arrangement with their lender to sell the house for less than is owed.
SHORT SALE: A short sale is an "arrangement" between the current owner of a home and the bank that lent them the money to buy their home, to accept an offer for less than the total amount owed to pay off the home.
Examples: If the unpaid balance of a loan is, say, $100,000 and a property sells for $90,000, under a short sale the lender might accept $90,000 as payment in full.
The lender must agree to the terms of the contract between buyer and seller
Short sale typically precedes the foreclosure process
The "deficiency" is the difference between the amount owed and what the bank collects at the short sale.
The deficiency will be accounted for. The deficiency can be 100% loaned to the seller in the form of a promissory note, which they then must repay.
If any portion of the deficiency is "written off" , the bank will report it as 1099 income to the seller or as a judgment which will show on the credit report for 10 years.
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Information on this website is not intended to be Legal Advice. Please consult with a Licensed Attorney and CPA prior to making significant decisions.
